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Minnesota Cracks Down On Sales Of Securities By Unlicensed Agents

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NU On-Line News Service, Oct. 10, 3:12 p.m. – The Minnesota Department of Commerce has become aware of companies and individuals targeting insurance agents to participate in the sale of non-insurance products with the promise of high commissions ranging from 11% – 13%.

The department has recently investigated a number of cases involving insurance agents who offered or sold a variety of investment instruments that fall within the definition of a security. The insurance agents involved were not licensed as securities agents and the instruments were not registered with the department as required by Minnesota law, the department says.

The types of unregistered investment instruments being sold by some insurance agents to Minnesota residents include but are not limited to promissory notes, customer-owned coin-operated telephones, viatical settlement contracts, senior settlements, universal lease programs, accounts receivable financing, and other alternative investment products, the department says.

Most of these instruments fall within the definition of a security and are governed by the securities laws and regulations pertaining to the sale and/or marketing of securities products, the department says. The department intends to pursue administrative sanctions against the license of any insurance agent who participates in the illegal offer or sale of these unregistered, non-exempt products or who engages in the sale of registered or exempt securities without first becoming licensed as a securities agent.

While many promoters claim that these investments are exempt from registration or that the product is “not a security” they clearly meet the definition of a “security,” the department says.

The companies soliciting unsuspecting insurance agents frequently fail to advise them of their need for a securities agent’s license or that they will be subject to the fraud provisions of the securities laws, the department says. Further, the promoters of these products often require that all parties must keep the transactions strictly confidential and may require agents and investors to sign nondisclosure agreements.


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